In your letter dated July 11, 2002, on behalf of the Tokyo Stock
Exchange, Inc.1 ("TSE" or "Stock Exchange"), the organization
responsible for the management and surveillance of the Stock Exchange and
its markets, you request advice from the Division of Market Regulation
("Division") of the Securities and Exchange Commission ("Commission")
that, as described more fully below: (1) the no-action relief the Division
granted to the Tokyo Stock Exchange in 19992 applies to the TSE and its officers, directors,
representatives, and Trading Participants (as described below); and (2)
the Division will not recommend enforcement action to the Commission if
the TSE and its Trading Participants undertake the limited activities
described in the 1999 Letter with respect to S&P/TOPIX 150 Index
options (the "New Option Contracts") traded on the TSE.

Specifically, you request advice, first, that the no-action relief
granted in the 1999 Letter to the Tokyo Stock Exchange and its officers,
directors, representatives, and market participants extends and applies to
the TSE and its officers, directors, representatives, and Trading
Participants as if (a) the 1999 Letter referred to the TSE in place of the
Tokyo Stock Exchange, and (b) the 1999 Letter referred to Trading
Participants in place of Regular Members and Special Participants.

Second, you request advice that the Division will not recommend
enforcement action to the Commission if, as described below and subject to
the terms and conditions set forth herein and to compliance with all of
the terms and conditions of the 1999 Letter, in connection with the offer
and sale of the New Option Contracts in the United States:

(1) The TSE and its Trading Participants act, as contemplated in the
1999 Letter, to familiarize "Eligible Broker-Dealers" and "Eligible
Institutions"3 in the United States with the New Option
Contracts without registering with the Commission as broker-dealers under
Section 15 of the Exchange Act;

(2) The TSE or its Trading Participants do the following, solely in
connection with the satisfaction of obligations Rule 9b-1(d) under the
Exchange Act, without registering with the Commission as broker-dealers
under Section 15 of the Exchange Act:

(a) a TSE Representative,4 a Trading Participant, or an Eligible
Broker-Dealer provides the updated TSE disclosure document, dated March
2002 ("Updated Disclosure Document")5 to an Eligible Broker-Dealer and the Trading
Participant effects transactions in the New Option Contracts with or for
that Eligible Broker-Dealer pursuant to Rule 15a-6(a)(4) under the
Exchange Act;

(b) a TSE Representative furnishes an Updated Disclosure Document to an
Eligible Institution, or a Trading Participant furnishes an Updated
Disclosure Document to an Eligible Institution, in response to an
otherwise unsolicited inquiry concerning the New Option Contracts, and the
Trading Participant effects transactions in the New Option Contracts with
or for that Eligible Institution pursuant to Rule 15a-6(a)(1) under the
Exchange Act;

(3) the TSE does not register with the Commission as a clearing agency
under Section 17A of the Exchange Act as contemplated in the 1999
Letter;

(4) the TSE does not register with the Commission as a national
securities exchange under Section 6 of the Exchange Act as contemplated in
the 1999 Letter; and

(5) an Eligible Broker-Dealer, TSE Representative, or Trading
Participant furnishes the Updated Disclosure Document to an Eligible
Broker-Dealer or Eligible Institution before the Eligible Broker-Dealer or
Eligible Institution effects a transaction in the New Option Contracts
subject to continuing compliance with all of the terms and conditions of
the 1999 Letter except: (i) as modified by this letter; (ii) that the TSE
Disclosure Document referred to in the 1999 Letter shall mean the Updated
Disclosure Document; and (iii) that TSE furnishes the Division, at least
30 days prior to the date definitive copies are furnished to Eligible
Broker-Dealers or Eligible Institutions, with a copy of any amendment made
to the Updated Disclosure Document because the information contained in
that document becomes or will become materially inaccurate or incomplete,
or because there is or will be an omission of material information
necessary to ensure that the document is not misleading.

Third, you request confirmation that (a) the furnishing of the Updated
Disclosure Document by a TSE Representative, by a Trading Participant, or
by an Eligible Broker-Dealer, in each case, to an Eligible Broker-Dealer
or Eligible Institution will satisfy the obligation under Rule 9b-1 under
the Exchange Act to furnish an options disclosure document before
accepting an order from a customer to purchase or sell the New Option
Contracts, and (b) that neither the furnishing of the Updated Disclosure
Document to an Eligible Broker-Dealer or Eligible Institution by the TSE
or by a TSE Representative, nor the furnishing of the Updated Disclosure
Document by a Trading Participant to an eligible Broker-Dealer or, in
response to an unsolicited inquiry concerning the New Option Contracts, to
an Eligible Institution, will constitute either solicitation or the
provision of a research report as those terms are used in Rule 15a-6 under
the Exchange Act.

The 1999 Letter allowed the Tokyo Stock Exchange and its Regular
Members and Special Participants to undertake the activities described in
the 1999 Letter to familiarize certain Eligible Broker-Dealers and
Eligible Institutions with the equity options and TOPIX options traded on
the TSE. You represent that the TSE has implemented and complied with the
terms and conditions of relief set forth in the 1999 Letter and that the
TSE will continue to comply with the terms and conditions of the 1999
Letter with respect to the options that are the subject of the 1999 Letter
as well as the New Option Contracts. In addition, you represent that,
among other things, the TSE has established careful limitations to assure
compliance with applicable U.S. securities laws and that the TSE will
continue, as necessary, to establish further limitations to assure
continued compliance with such laws. You also represent that the TSE will
not provide persons located in the U.S. with direct electronic access to
the TSE without express approval from the Commission.

We understand the facts to be as follows:

Regulatory Background

On November 1, 2001, the Tokyo Stock Exchange demutualized, changing
its form of organization from a membership corporation to a joint stock
company and changing its name to "Kabushiki-gaisha To-kyo Sho Ken Tori
Hiki Jo" (in English, the "Tokyo Stock Exchange, Inc."). The TSE is
established in accordance with the Securities and Exchange Law of Japan
(Law No. 25 of 1948, as amended) ("Securities and Exchange Law"). At
present, the only stockholders of the TSE are General Trading Participants
(defined below). The TSE is licensed to act as a stock exchange by the
Prime Minister of Japan pursuant to a license initially granted by the
Minister of Finance of Japan under the Securities and Exchange Law. As a
licensed stock exchange, the TSE is authorized to trade stocks, bonds,
fixed income derivative products and equity derivative products. The
equity derivative products authorized for trading include futures and
options on stock indexes and options on equities. Under the Securities and
Exchange Law, the Prime Minister has supervisory authority over all stock
exchanges in Japan. The Prime Minister is empowered to regulate stock
exchanges. Among other things, the Prime Minister is authorized to grant
licenses to stock exchanges, to approve their constitutions, business
regulations, and brokerage agreement standards, and to approve the
fairness and efficiency of transactions in options contracts on stock
indexes and equities. The Prime Minister has delegated the authority
referred to above, other than the authority to grant licenses to stock
exchanges, to the Commissioner of the Financial Services Agency.

Under the Securities and Exchange Law, only stock corporations
registered by the Prime Minister may engage in the securities business.
Only such Japanese securities companies, and foreign securities companies
registered by the Prime Minster pursuant to the Securities and Exchange
Law and to the Law Concerning Foreign Securities Firms, can become Trading
Participants on the TSE.

Market Participants

Trading Participants on the TSE are divided into four types, based on
categories of "Trading Qualification Status" (i.e., categories of
trading in which the TSE has authorized participants to trade), as
follows: "General Trading Participants," who are qualified to trade all
securities and contracts on the Stock Exchange; "Bond Futures Trading
Participants," who are qualified to trade government bond futures
contracts and options thereon on the Stock Exchange; "Stock Index Futures
Trading Participants," who are qualified to trade stock index futures and
option contracts on the Stock Exchange; and "Equity Options Trading
Participants," who are qualified to trade equity options contracts on the
Stock Exchange. All Trading Participants are members of the Japan
Securities Dealers Association, and thus are subject to its rules. Also,
Trading Participants' transactions on the Stock Exchange are subject to
the relevant provisions of the Stock Exchange's Constitution and its rules
and regulations. All Trading Participants, to the extent that they are
qualified by the TSE to trade option contracts on individual stocks listed
on the TSE or on stock indexes, function similarly to each other with
respect to their trading activities, and are subject to the TSE's
Constitution, rules, and regulations. Therefore, all Trading Participants
both as to themselves and equity options and stock index options are
subject to similar regulatory requirements.

All current Trading Participants are the same entities that, at the
time of demutualization, were either Regular Members or Special
Participants.

Clearing System and Margin

Since the 1999 Letter, the TSE has adopted a clearing system pursuant
to which Trading Participants clear their transactions for themselves.
Trading Participants are not, however, necessarily required to acquire
Clearing Qualification status. If they do not have the appropriate
Clearing Qualification status, they clear their transactions through other
Trading Participants that have appropriate Clearing Qualification status.
The TSE acts as a clearing body.

Another change since the 1999 Letter is that the TSE margin rules for
Trading Participants and their customers are now based on the Standard
Portfolio Analysis of Risk System developed by the Chicago Mercantile
Exchange.

All transactions creating or closing positions in New Option Contracts
are executed and settled in Tokyo by Trading Participants that are
authorized by the TSE to trade New Option Contracts. New Option Contracts
are not fungible or interchangeable with options that are traded on any
other market.

The New Option Contracts

You represent that the S&P/TOPIX 150 Index ("Index") is derived
from the over 1400 stocks that comprise the TOPIX, a composite index of
all the common stocks listed on the First Section of the TSE. You
represent that the 150 stocks included in the Index are highly liquid
securities selected from each major sector of the Tokyo market and
represent approximately 70% of the market value of the First Section.

Standard & Poor's, in collaboration with the TSE, maintains the
Index. The TSE began trading the New Option Contracts and futures
contracts on the Index on June 11, 2001.

Surveillance

You represent that the TSE is the primary trading market in Japan for
almost all of the component stocks of the Index. In addition, both the New
Option Contracts and futures contracts on the Index trade on the TSE.
Consequently, you represent that the TSE has access to all material
information necessary to conduct surveillance.

Response:

Based on the facts and representations set forth above, the Division
confirms that the no-action relief granted in the 1999 Letter extends and
applies to the TSE and its officers, directors, representatives, and
market participants as if (a) the 1999 Letter referred to the TSE in place
of the Tokyo Stock Exchange, and (b) the 1999 Letter referred to Trading
Participants in place of Regular Members and Special Participants.

In addition, based on the facts and representations set forth above,
and subject to all of the terms and conditions of the 1999 Letter, the
Division will not recommend enforcement action to the Commission against
the TSE, any of the officers, directors, or representatives of the TSE, or
any Trading Participants under Section 15(a) of the Exchange Act if the
TSE or Trading Participants take the limited steps described in the 1999
Letter to familiarize Eligible Broker-Dealers and Eligible Institutions in
the United States with New Option Contracts without the TSE or Trading
Participants registering with the Commission as broker-dealers under
Section 15(b) of the Exchange Act.

The Division also will not recommend enforcement action to the
Commission against the TSE, any of the officers, directors, or
representatives of the TSE, or Trading Participants under Section 15(a) of
the Exchange Act if, solely in connection with the satisfaction of
obligations under Rule 9b-1(d) under the Exchange Act and under the
limited circumstances set forth in the 1999 Letter, (1) a TSE
Representative, Trading Participant or Eligible Broker-Dealer provides the
Updated Disclosure Document to an Eligible Broker-Dealer and the Trading
Participant effects transactions in New Option Contracts with or for that
Eligible Broker-Dealer pursuant to Rule 15a-6(a)(4) under the Exchange
Act; or (2) a TSE Representative furnishes an Updated Disclosure Document
to an Eligible Institution, or a Trading Participant furnishes an Updated
Disclosure Document to an Eligible Institution, in response to an
otherwise unsolicited inquiry concerning New Option Contracts, and the
Trading Participant effects transactions in New Option Contracts with or
for that Eligible Institution pursuant to Rule 15a-6(a)(1) under the
Exchange Act. The staff notes, in particular, that the TSE will continue
to advise Trading Participants, as provided in the 1999 Letter, that,
under U.S. law, Trading Participants which are not U.S. registered
broker-dealers may deal with Eligible Institutions only in accordance with
Rule 15a-6 under the Exchange Act, principally through U.S. registered
broker-dealers as provided in the Rule.

Additionally, based on the foregoing, the Division also will not
recommend that the Commission take enforcement action against the TSE
under Section 17A of the Exchange Act if it operates solely in the manner
described above for New Option Contracts without registering with the
Commission as a clearing agency. In addition, the Division will not
recommend that the Commission take enforcement action against the TSE, any
of the officers, directors, or representatives of the TSE or Trading
Participants under Section 5 of the Exchange Act if the TSE and its
Trading Participants operate solely in the manner described in the 1999
Letter with respect to New Option Contracts without the TSE registering
with the Commission as a national securities exchange under Section 6 of
the Exchange Act.

The Division has reviewed the Updated Disclosure Document. Based on our
review of that document, the Division advises that it will not recommend
that the Commission take enforcement action against a TSE Representative,
a Trading Participant, or an Eligible Broker-Dealer pursuant to Rule
9b-1(d) under the Exchange Act, if the TSE Representative, Trading
Participant, or Eligible Broker-Dealer furnishes the Updated Disclosure
Document to an Eligible Broker Dealer or Eligible Institution before the
Eligible Broker-Dealer or Eligible Institution effects a transaction in
the New Option Contracts, subject to the following conditions:

(1) the Eligible Broker-Dealer or Eligible Institution previously has
received the ODD;

(2) the TSE requires that Trading Participants, before effecting a
transaction with or for an Eligible Broker-Dealer or eligible Institution
in the New Option Contracts determine, as described in the 1999 Letter,
that the Eligible Broker-Dealer or Eligible Institution has received the
ODD and the Updated Disclosure and maintains a record of that
determination; and

(3) the TSE furnishes the Division, at least 30 days prior to the date
definitive copies are furnished to Eligible Broker-Dealers or Eligible
Institutions, with a copy of any amendment made to the Updated Disclosure
Document because the information contained in that document becomes or
will become materially inaccurate or incomplete, or because there is or
will be an omission of material information necessary to ensure that the
document is not misleading.

These positions of the Division concern enforcement action only and do
not represent conclusions on the applicability of statutory or regulatory
provisions of the federal securities laws. The Division has taken these
positions based, in part, on the fact that the Commission, along with the
Commodity Futures Trading Commission, has entered into a Statement of
Intent with the Financial Services Agency of Japan that provides a
framework for mutual assistance in investigating regulatory
matters,6 and that foreign broker-dealers, including
Trading Participants, electing to deal with U.S. institutional investors
pursuant to Rule 15a-6(a)(3) under the Exchange Act are required to
provide directly to the Commission, upon request, information, documents,
testimony, and assistance in taking the evidence of persons that relate to
transactions pursuant to Rule 15a-6(a)(3) under the Exchange Act.
Moreover, these positions are based on the understanding that under
Japanese law only members licensed or registered by the competent Japanese
authorities may have direct access to the TSE, which is licensed as a
stock exchange and subject to regulation by the Minister of Finance and
the Financial Services Agency. Finally, these positions are based on your
representation that the TSE will not provide persons located in the U.S.
with direct electronic access to the TSE without express approval from the
Commission.

The positions of the Division in this letter are based on the
representations that you have made; any different facts or conditions
might require a different response, and these positions are subject to
modification or revocation if the facts and representations set forth
above are altered.

Sincerely,

Elizabeth K. KingAssociate Director

Endnotes

1You note that on November 1, 2001, the Tokyo
Stock Exchange demutualized, changing its form of organization from a
membership corporation to a joint stock company and changing its name to,
in English, the "Tokyo Stock Exchange, Inc." You note that as a result of
this change, the TSE no longer has members. You state that the Regular
Members and non-members authorized to trade on the Tokyo Stock Exchange
prior to demutualization ("Special Participants") have been replaced by
"trading participants," as described below, that the TSE has authorized to
trade in some or all of its markets.

2See letter from Robert Colby, Deputy
Director, Division, Commission, to Richard P. Streicher, Loeb & Loeb
LLP, dated July 27, 1999 ("1999 Letter"). The 1999 Letter permitted the
Tokyo Stock Exchange and its Regular Members and Special Participants to
undertake certain activities to familiarize certain Eligible
Broker-Dealers and Eligible Institutions (as defined in the 1999 Letter
and as described more fully below) with equity options and Tokyo Stock
Price Index ("TOPIX") options traded on the Tokyo Stock Exchange.

(a) it must be a "qualified institutional buyer" as defined in Rule
144A(a)(1) under the Securities Act of 1933 ("Rule 144A" and the "1933
Act" respectively), or an international organization excluded from the
definition of "U.S. person" in Rule 902(k)(2)(vi) of Regulation S under
the 1933 Act; and

(b) it must have had prior actual experience with traded options in the
U.S. options market (and, therefore, would have received the disclosure
document for U.S. standardized options called for by Rule 9b-1 (the
Options Disclosure Document ("ODD")) under the Securities Exchange Act of
1934 ("Exchange Act").

4TSE Representatives are representatives in the
TSE's office located in New York City or outside the U.S. as described in
the 1999 Letter.

5Under the terms of the 1999 Letter, the Tokyo
Stock Exchange agreed, among other things, to require TSE Regular Members
and Special Participants to provide Eligible Broker-Dealers and Eligible
Institutions with a copy of the TSE disclosure document, which provides an
overview of the TSE and the equity options and TOPIX options traded on the
TSE, prior to effecting a transaction with or for the Eligible
Broker-Dealer or Eligible Institution in those options. In addition, the
Tokyo Stock Exchange agreed to provide the Division with a copy of any
amendment made to the TSE disclosure document at least 30 days prior to
the date definitive copies are furnished to Eligible Broker-Dealers and
Eligible Institutions. Pursuant to this condition of the 1999 Letter, the
TSE has provided the Division with a copy of the Updated Disclosure
Document, which has been revised to provide information concerning various
market and regulatory changes in Tokyo since October 30, 2000, when the
Tokyo Stock Exchange most recently revised it disclosure document, as well
as information concerning the New Option Contracts.

6See Statement of Intent of the United
States Securities and Exchange Commission, the United States Commodity
Futures Trading Commission, and the Financial Services Agency of Japan
Concerning Cooperation, Consultation, and the Exchange of Information (May
17, 2002).